Tim ‘Cycles Man’ Wood Podcast – Cyclical Technical Analysis
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Jim Goddard: 00:47
My guest is Tim “Cycles Man” Wood, editor of Cycles News and Views on Cyclesman.com. Welcome to the Technical Traders podcast.
Tim Wood: 00:57
Jim, thanks for having me.
Jim Goddard: 00:59
Tim, before we get into the interview, can you tell us a little bit about Cycles News and Views?
Tim Wood: 01:06
Well, Cycles News and Views, I don’t call it a newsletter. It’s a research letter to try to help people gain insight and an understanding of the market through the use of cycles, and cycles are really nothing more than trend quantification. And then you wrap some statistics around it, and you can develop statistical expectations. And then, I also use the kind of in the background as a broader perspective with Dow theory.
Jim Goddard: 01:40
So Tim, how did you get into trading or investing?
Tim Wood: 01:45
Well, that’s an interesting story. I haven’t thought about it in a long, long time – you’re making me go back, but I guess it all started in college. I took it was; actually, I don’t remember the name of the class, but it was; I remember it was a senior 400 level economics class or finance class, and man, it was fundamentals of analysis, I think, or something to that effect. And I remember we, we were deriving equations and this professor he’s writing on the board and we’re doing all this math and all this stuff, and there was one chapter on technical analysis. And when we’re doing all this stuff, and I realized that I see the philosophy, I’m exposed to the philosophy of technical analysis, that it’s all discounted in price, and it made sense to me.
Tim Wood: 02:38
And so, from there, it became self-study. I bought some books and John Murphy’s books and Bob Proctor’s material back in the day F&N was on TV, and you had Real Analysis on TV. And actually, we got it on a satellite back in the day. And you know, Peter Lites was on there. Bob Proctor and then Richard Russell. I got into Dow theory, and Richard Russell actually helped me obtain some of the original old writings from Robert Ray. Robert Ray, I think he and William Peter Hamilton put Dow theory on the map. Dow never actually wrote a book. He died in 1902. William Peter Hamilton worked for Dow. And, you know, he wrote one book and some articles and stuff.
Tim Wood: 03:35
And then, Robert Ray worked for him in the thirties, and he was the leading Dow theory person during the 1930s; and Robert Ray wrote a lot of material. Anyway, Russell helped me get that. I had a relationship with him, and it’s kind of cool. It’s like reading the dead sea scrolls or something. You know, original old technical analysis and was able to put things together and see how cycles in the Dow theory, there was a common element in that. I discovered that every primary trend change, be it bullish or bearish, coincided. There were actually dates. William Peter Hamilton, I think it was–; gave dates in his book. And I saw that I’m like, oh my God, that’s four-year cycle tops and bottoms. And so I saw how the two theories meshed, and you know, the rest is history.
Tim Wood: 04:31
From there, I was able to make some calls. I had an article published in 2000 or 2001. It’s a technical analysis of Stocks, Commodities Magazine calling the top and end the decline. I said that we would go down below a certain level, and we exceeded that level by 200 points. So my target was met, and the rest was history. And from there, Cycles News and Views began.
Jim Goddard: 05:01
Is there anybody you really admire or who influenced you to become involved in the financial markets?
Tim Wood: 05:07
Yeah, I think the guys that I mentioned, Bob Proctor, Peter Lites, and Richard Russell, all three, I think, were huge. Bob Proctor, I’ve actually physically met at an investor conference in New Orleans early on. He kind of took me under his wing, super super guy. And so is Peter; I’m not taking anything away from any of them. They were very complimentary. To tell the story about Peter Lites, I sent him an article, the article that was published, actually, I don’t remember if it was published yet, but I sent the work; I just did the work. And I left out one, backing up the cycles work I discovered through Walter Bressert’s work and took a course from Walter Bressert. It took about a year to get through that correspondence course hands-on with Walter Bressert.
Tim Wood: 06:03
He was a real pioneer in the cycles world. And at the time, there was an Institute; it was called the study for the foundation of cycles. I think they were headquartered in Chicago at the time. And Bressert was on the board. I think Proctor was on the board for a while. And Peter was involved with that as well. Well, anyway, after taking that course, that’s where I got involved with the cycle stuff. So I was able to use all of that material. And like I said, it worked like a champ, identified the top. It was published in Stocks, Commodities Magazine.
Well, anyway, I sent the material to Peter Lites. Don’t remember how or why? I don’t remember the whole story about it. I sent it to Peter Lites, and he said that he saw it, and he thought, oh boy, here we go. But he read the article and called me, and he was very, very complimentary, and we became friends then. So those guys were like rock stars in my world back in the day, you know? And this was in the mid-eighties, late-eighties, and early-nineties timeframe.
Jim Goddard: 07:06
What’s your trading philosophy? What set of principles, beliefs, or experiences drive your decisions?
Tim Wood: 07:14
The same thing I just said; the cycles and Dow theory, and I tend to err on the side of conservatism. I’m not a big risk-taker, and that has its pros and its cons. Sometimes you can be too conservative or too cautious. But then sometimes not. So, you know, everything cuts two ways, but I believe in the theories that I have they work.
I guess the one issue is that all of the old historians and old school technicians have paid these prices. It seems like anybody who’s known the most about the market has been more cautious, and being in this bubble environment, you know, that’s, that’s been somewhat costly because nobody that I know imagined that we would see this thing blown up into the bubble that it has been blown up into. And so, in that respect, I think many of the old school technicians have underestimated the magnitude that the bubble could be blown into, but it is a disastrous bubble.
Jim Goddard: 08:31
How important is it to have an investment philosophy?
Tim Wood: 08:34
Well, I think you have to have a discipline of proven discipline that works, and you have to stick to it because I think one of the problems that people get into is that if they skip around from discipline to discipline if you abandon something.
Let’s say you have something that works. As an example that you know is pretty successful, 70% of the time, well, that’s probably a winning strategy. Still, if you abandon it whenever you hit a bad streak, at 30%, by the time you go onto the next strategy. You keep looking, you know, I think that’s a recipe for disaster rather than making yourself an expert and understanding a given philosophy. And for me, that’s cycles and statistical analysis. Because like I said, once you understand it, the cycles, it’s basically just trend quantification. So you can wrap statistics around that and develop expectations. And so it is a statistic and, cycles, contract, they expand, but on balance you know, there are averages, there are norms. And I think that’s where the answer lies.
Jim Goddard: 09:42
We’ll have more with Tim wood right after this.
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Jim Goddard: 10:14
Welcome back. We’re speaking with Tim “Cycles Man” Wood. Tim, how did you get, I don’t want to use the term nickname, but it is kind of because we use it all the time, the term “Cycles Man,” Tim “Cycles Man” Wood. Where did that come from?
Tim Wood: 10:29
Well, there was a guy at the time, when I published the article in Stocks and Commodities magazine, you have to go back to the year 2000, 2001, when the Internet was new. My first memory of the Internet was 96, 97. And I mean, it was kind of a taboo thing. There wasn’t a lot of stuff on the Internet, and anyway, I needed a name, and there was a guy on Fox News at the time. Fox business news, or maybe it was CNBC, I don’t even know, but he said he called himself the Chart Man. And I remember I’d see those things from him, and so I literally just pulled it out of the air, Cycles Man. And I just kind of ran with it and had that name ever since.
Jim Goddard: 11:17
What’s your favorite type of analysis or indicator you find that helps you time your trades or investments?
Tim Wood: 11:24
The cycles analysis. Definitely the cycles analysis and some of the proprietary indicators that I’ve developed over time. I mean, as I said, you have a statistical window where you’re looking for a low or a high or whatever the case may be. So you have that target if you will. And then you have indicators that you wrap around price to help you zero in on when that actual cycle of whatever degree has top or bottomed. And so that’s it, cycles and the indicators that I use.
Jim Goddard: 12:01
What’s something you wish you would’ve known before you started trading and investing.
Tim Wood: 12:07
That’s a tough question. I would say the foresight to have imagined; I go back to this bubble that we’re in, that it could have been blown into the bubble that it has, maybe that’s just unimaginable when you look back. This is something they’ve been fighting literally for 20 years and done a magnificent job holding things together. But to elaborate on that just a minute. So someone understands what I’m saying. When you look at, you know, volume characteristics of the market, job participation and other economic measures, the real economy, and for people who are old enough to really remember it, I think they’ll agree with this. Still, it sort of all peaked with the Dot Com bubble.
Tim Wood: 13:00
And then, as we rolled over into the 2002 low, we saw the market and economy were trying to deflate. It was trying to breathe. It had been in a tremendous run; like I said, we’d run up into with Dot Com era, and the telecom was on fire. Then I was working in the telecom business, and the economy had really moved into a top at that time. But then coming out of the 02 low, where it started was, you know, that’s when I think the Fed really stepped into the market and started taking a more hands-on approach, trying to hold things, bridge the gap, as they say, and what they did was they created, if you think back, coming out of the 02 low, in my world. They pushed that advance into the ’07 top. That was the longest advancing four-year cycle in history.
Tim Wood: 13:52
And what happened as a result of that? They created the worst financial crisis since the great depression. Not my words, Google it; that’s what they called it, the decline into the ’09 low. And that was a direct result of, I mean, the market was trying to top, and they wouldn’t let it breathe. It just needed to breathe. It needed to unravel a little bit. We needed to skip along the bottom and, you know, flush things out and let it correct. Well, that was never really allowed to happen. And then the market was pushed into that bubble top at that time. And it created the backlash, as was the decline into the ’09 low. Well, then, coming out of that low, what has happened? What did they do? More of the same on steroids, as they say.
Tim Wood: 14:36
We push up into the 2020 top, and then we start to try to unravel again. And then here we go with all the stimulus and so having not underestimating the power of the Fed and their ability to push this into the largest bubble ever, I think has caused a lot of technicians in the sense that they just simply, it was unimaginable that we would be in this position.
Now that does not change the fact that I believe that we are in, as a matter of fact, I’m convinced without a shadow of a doubt, we sit at the top of the biggest bubble financial bubble in history, and it has to be dealt with, it will be dealt with it has to unwind. And it will; I think the question is how well can they continue to hold it? And then the consequences, who knows, but I think we face a tremendous unwinding with this bubble, absolutely.
Jim Goddard: 15:41
What’s the best advice you ever received?
Tim Wood: 15:45
From a trading perspective? One thing that comes to mind that Richard Russell told me, and he said, it was about your discipline and perseverance. Stick to your discipline and perseverance.
Jim Goddard: 16:09
What’s the best call you ever made that other people thought wasn’t the right call, or they made fun of you or denigrated it in some way.
Tim Wood: 16:19
Actually, I have several of those. The top in 2000, you know, anytime you stick yourself out in the public, you’re subject to criticism. But I remember making the call in 2000 saying we were going to go below the 98, 4-year cycle low. And I think that was right at a 40% decline. I don’t remember the numbers now, but 39, 40%, whatever on the Dow. And I remember at the time people when the article came out, and it was like I said, the Internet was young and people, you know, they threw rocks at me and thought I was crazy, but it happened. And like I said, that kicked off Cycle’s News and Views.
The next great call, I don’t know which one was better, but as they advanced into the ’07 top took form, I kept saying, it’s stretched, it’s stretched, it’s a bubble, it’s a bubble. They’re pushing; it’s a four-year top. And I didn’t have an indicator. I didn’t have a cell.
Tim Wood: 17:19
I remember to the day I remember where I was standing getting phone calls from people asking me in August of ’07, is this it? Is it top? And I’m like, no, we need one more push because the structure wasn’t right. And we declined into the summer there and then made one more push up late summer and then made one more push up in October, and then boom, it clicked. It had the Dow theory, and the primary bearish trend changed. The cyclical structure fell in place. And I had said then that we would go below the 2002 low, and we did. So that was a great call.
Tim Wood: 17:51
And then another one was, and this call was made on the air on a talk show and on my own website and some podcasts the week after the tippy top. The following week, I saw what I needed to see and made the call-in oil. Everybody was talking about peak oil, peak oil, peak oil. And I said, no. I had statistics that said we would go back below the previous three-year cycle in the CRB, which meant we would just see a collapse. So that was an excellent, excellent call. So there’s a number of them.
Tim Wood: 18:31
In housing, I got the housing call right. In 2000, I remember talking to a builder. We lived in the neighborhood, we just moved, and the builder came in, and he was kind of a macho arrogant guy. And I remember in 2006; I’d already seen the signs, late 2005, early 2006, the signs that housing had peaked. I remember sitting in a board meeting with him and trying to, you know, kind of warn him about it, talk to him about it.
He wanted to be smart. He said, well, what do you know about housing? And I said I don’t know anything about housing, other than I can read a chart. I told him what I saw coming. And, of course, he thought I was an idiot. And they ended up abandoning the neighborhood as a builder a few years later. So that was actually a pretty good call; it made me feel good.
Jim Goddard: 19:23
Tim, you used to do a lot of financial television shows, and all of a sudden, that dried up. Is that because, as we heard in that famous movie, you can’t handle the truth.
Tim Wood: 19:37
I think there was a lot of that. I don’t know what shut that down. You know, Peter Lites, Robert Proctor, a lot of us guys. I think a lot of that is just a function of the bubble environment. I don’t know all the moving parts; you make great calls, it’s a thankless business. You make fantastic calls like those over the years. And then you get into an environment where the market is a number of things.
There’re so many so-called experts out there now on the Internet, and the Internet’s matured. People making YouTubes, and everybody can put stuff out for free. And, as a rule, you get what you pay for. And so I think that’s probably a factor. Another factor is when you sit, warn from a long-term historical perspective, and talk about the bubble that it’s been and the bubble that it is and how crazy the environment is, you know, people tend to dismiss that over time.
Tim Wood: 20:34
It becomes the new norm to see this bubble environment. It’s normal for commodity prices to be where they are. It’s normal for housing prices to be where they’re back to; and it’s normal to see the market. And in reality, that’s not normal; it’s an extreme. But people don’t recognize the extreme because we’ve been in this environment for so long. So I think it’s also a function of falling out of favor because people don’t understand.
I think that reckoning will come where people will come to understand. And then, of course, I know what they’ll say. Well, a clock is right twice a day. But, I think it’s a number of those things. But I think primarily, and I’m guessing that I would say that between, the maturity of the Internet and so many people out there putting out stuff, it’s hard for people to find what’s valid and what’s not. I mean, when you’re looking for truth, looking for analysis, how do you know what to pick from, or how do you really know?
Tim Wood: 21:42
And then the other thing, like I said, when you talk about the crazy environment that we’re in and people don’t see it, they can’t see it, then after a while, it just falls on deaf ears. But on that note, let me give you an example of the magnitude of this bubble.
I’m saying this from memory because I don’t have the math in front of me, but everybody that’s market people, I say everybody, most market people are familiar with the south sea bubble. I did some math, it’s probably been close to a year ago now, but I was looking at the size and scope of the south sea bubble. And what it was, the south sea bubble was a dead expansion scheme. It was a partnership between private industry and England to the English government for exclusive trading rights in the south seas; they were going to basically monetize their debt and take on their debt. England could continue to expand the debt. It’s all about expanding the debt like Richard Russell used to say, in-flight or die. And so they did, they did that.
Tim Wood: 22:51
And I saw an estimate; I think it was between 30 and 50 million pounds, I believe was the size of the debt at that time. So to put that in perspective, I had some 1904 encyclopedias, and I looked up to the south sea bubble. Sure enough, it was in there. And as a 1904 dollar, it was estimated to have been. And I don’t remember the numbers, but it was like 150 million or something like that, whatever the case was. That’s irrelevant anyway, whatever the number was, I just don’t remember on the fly, but then I found a conversion, you know, just Googled, okay, 1904 dollars equals whatever, and found out what the dollar equivalent would be worth today.
Tim Wood: 23:35
And it was like the point being is that the bubble environment we’re in today is based on the debt. It’s an asset bubble, but it’s been debt-driven. The debt bubble today, looking at the US government’s debt. That’s on the balance sheet; you can go to the Fed site and Google the number. And it’s like, I don’t know, Reddit 30 trillion, it was over 6,000 times that of the south sea bubble. So that’s what I’m saying when you’re in an extreme environment for an extended period of time, you don’t even recognize the extremity of the environment that you’re in because it’s normal.
That’s what we face. This has to be unwind and be dealt with. And that’s what the Fed has been fighting and trying to hold, and I understand that. And on the one hand, you’re trying to prevent it, but at the same time, the prevention is making it even worse. But as they say, if you can kick that can down the road and let it happen later, I guess that’s what you do. And so I get it. But anyway, I don’t remember the question now, but the bubble is enormous.
Jim Goddard: 24:52
Now for young traders. Many of them have never experienced a recession. There hasn’t been an official one since 2008. If things go bad, do you think they would panic? Would they look at the past and see what you should do? Or do they really believe the Fed has your back? Nothing bad can go wrong.
Tim Wood: 25:11
I think people have been trained that the Fed has your back so much; as I said, since 2002, this has been going on for 20 years, and I think that’s ingrained in people. And I guess, I guess my advice to younger people is, it may sound taboo. It may sound old school may sound whatever, you know, square as they used to say in the seventies. But my thinking is that it is a grounding. It’s kind of like martial arts. You know, I took traditional martial arts, and it was like basics, basics, basics, basics, basics, basics, basics. It’s boring, basics, more basics, but you did it. And all of a sudden, you realize that you have built a foundation that is basically muscle memory. And it’s just, you’re like, wow, where did this come from? You’ve programmed your brain, you’ve built a foundation.
Tim Wood: 26:07
And so that’s the way I see technical analysis and historical technical analysis, more importantly. You know, it’s one thing that Peter Lites said to me when he read that article – I’m talking about my article in 2001. He said most people go back. If they go back 20 years, they think they’ve done some analysis. And this analysis went back to 1896, the inception of the Dow Jones Industrial Average. And so that’s why I’m saying that when you have a foundation in history and some statistical basis, statistical analysis wrapped around that history, you can look at a situation like this and recognize it for what it’s for. But if you don’t have that perspective, there’s no way to see it.
Jim Goddard: 27:04
One of the people I interviewed was Eric Haddock from InsideTrackTrading.com. He said history doesn’t repeat, but it often rhymes.
Tim Wood: 27:13
I would agree with that, absolutely.
Jim Goddard: 27:15
I agree with that. So you have similar circumstances, but the outcome isn’t exactly the same, but roughly it will be. So if we’re doing an echo of history. What do you think is happening right now?
Tim Wood: 27:28
Well, again, I think we’re dealing with the unwinding or the eventual unwinding. It’s a process. And like I said, it’s not a conspiracy. It’s not an excuse. It’s a fact. Anyone can look at the market fairly and see that there is, I mean, why do they raise interest rates? Why are they lower interest rates? It is a deliberate attempt to hold this thing. And I get that. I mean, if you or I were in their shoes, we’d be doing the same thing because we know the inevitable.
So the thing is that there’s more of a hands-on approach to the market, so there have been more outside influences, which is, in turn, like I said, it’s good and bad. It’s good in that it’s prevented this; it’s bad in the sense it’s made it worse. And so I lost my train of thought on what was your question? I was going somewhere with that. What was your question?
Jim Goddard: 28:29
Well, it’s just that we call them youngsters because we’re all old guys, but they haven’t experienced this for 12 years. We haven’t had a recession, an official one.
Tim Wood: 28:39
Exactly. And so my point was they don’t have that perspective. I lost my train of thought for a second, but yes, that’s exactly right.
Jim Goddard: 28:46
Do you have any advice for them? Is there reading they can do? Some research that history has a tendency to repeat itself.
Tim Wood: 28:57
I think everybody’s got to find their own niche, but cycles analysis, Walter Bressert’s material, is no longer available. He was much older than me, and he died. Richard Russell wrote one or two little basic books on Dow theory, and I guess that’s a start, but I didn’t really learn Dow theory until I got those original writings.
Unfortunately, it’s kind of like finding a traditional martial arts school. To find these original writings, this old traditional technical analysis is kind of hard, but I think that’s the direction people need to go. And I’m not talking about a book where you learn what a head and shoulders pattern is and a rising wedge and all this kind of thing. I’m saying some real technical analysis that you can wrap some statistics and history around. And that’s hard to find these days because it’s just kind of a lost art.
Jim Goddard: 30:07
Tim, before we go, is there any topic or financial or business practice that you’re really passionate about?
Tim Wood: 30:14
Well, I love the markets. I absolutely love the markets, as frustrating as they can be. You know, the analysis, that’s what I do; it’s who I am; it’s who I become. And I love the markets, but at the same time, when you see something like the bubble environment that we’re in and knowing that we’re in that environment and seeing it just stretch and stretch and stretch, that can also be frustrating. But no, other than that, that’s about it.
Jim Goddard: 30:46
Tim, thank you so much for being on The Technical Traders podcast.
Tim Wood: 30:51
Thank you very much.
Jim Goddard: 30:52
My guest has been Tim “Cycles Man” Wood, editor of Cycles News and Views on Cyclesman.com. He was speaking to us from Gulf shores, Alabama. I’m Jim Goddard. Thanks for joining us this week on the Technical Traders podcast. If you found value in our show, subscribe and give us a rating or share it with a friend; that would be greatly appreciated as well. Thetechnicaltraders.com your stores for technically proven strategies to make more money with less risk. So you can take your trading to the next level comments made on the Technical Traders podcast or an expression of opinion only and should not be construed as investment advice or recommendations to buy or sell any financial instrument. This information is for general information and educational purposes. Guests on the show are not compensated for their participation. To view our full disclaimer, please visit our website at www.thetechnicaltraders.com.